Is There A Sustainability Imperative For The Healthcare Industry?

Is There A Sustainability Imperative For The Healthcare Industry?
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Healthcare, as we know it, is simply not sustainable. With growing realities including escalating costs shifting market access models; stakeholder and regulatory scrutiny; low patient trust; and an evolving physical environment threatening human health -- the industry knows it needs to make itself more sustainable -- but the answers might not be so easy to find.

Most healthcare multinationals have long invested in some type of philanthropy, sustainability or CSR programs, although to varying degrees. Typically, these investments focus on the core challenge that healthcare faces as an industry -- access to medicine and care. The approach so far has been mostly through philanthropy programs to expand access to those who can't afford it any other way. Those that go beyond this main challenge tend to do some additional work around three core CSR pillars: people (employee health, community investment, science education); planet (operational efficiency, product stewardship); and performance (business innovation, financial sustainability).

But among most companies, we must ask the question -- how integrated is sustainability into the business? Are we really leveraging sustainability to deliver value? Consider -- employee volunteerism may be a nice engagement activity, but how much does the business care? In order to be meaningful, sustainability investments must be higher level, more strategic, holistic and integrated with business activities. The following trends are pushing the needle in that direction, whether we like it or not:

  • Rise in pressures on healthcare system sustainability: The cost of healthcare continues to escalate for both patients and providers, in a way that cannot continue forever. To further increase pressure, traditional issues of inadequate access persist, while new issues of aging populations and skyrocketing rates of non-communicable diseases grow -- all of which tax the system. Value and patient outcomes has become a strong currency, as payers demand more efficacy and safety, while old models of philanthropy become obsolete as patents come to an end and even good will requires some form of financial equilibrium and long-term sustainability. Implication: Healthcare companies must have a point-of-view about a future healthcare system of the future that is sustainable, delivers access, and presents a value proposition that puts patient results at least equal to profits.
  • Environmental impacts on human health increasingly apparent: We are just beginning to more clearly see the impact of our physical environment on individual and public health. Real human and financial effects are being caused by pollution, for example, in countries like China where air pollution has become the No. 1 cause of premature death, and shifts in disease burden due to climate change patterns. Implication: As an industry focused on human health, healthcare must be an advocate for policy and partnership that drastically cuts environmental footprint -- not just a supporter of environmental stewardship.
  • Increased regulations call for greater transparency: The European Parliament in April 2014 passed the Directive on the disclosure of non-financial and diversity information, requiring companies of over 500 employees (general) report on environmental, social and employee-related, human rights, anti-corruption and bribery matters by 2017. Implication: Large, publicly traded and some private healthcare companies will need to track environmental, social and governance data and set up process management tools to report externally.
  • Customers demand more sustainable supply chains: Setting targets on carbon, waste, water, and more closely managing the supply chain is trending across the board for hospital systems and the healthcare industry. In a Johnson & Johnson study on the growing importance of sustainable products, for example, a survey of hospitals demonstrated 54 percent agreed green attributes are very important in their purchasing decisions. What's more, states like California and EU government bodies are beginning to build environmental preferable purchasing (EPP) into procurement models. Implication: Being a differentiated company that proactively pursues sustainability integration will create a competitive advantage to customers and get ahead of potential regulation.
  • Patient trust in healthcare remains low: The 2014 Edelman Trust Barometer indicated that, amongst informed publics, the pharmaceuticals industry was trusted "to do what is right" by less than two thirds of respondents. Said Jeremy Cohen, the rising cost of healthcare, ethical questions in clinical trial transparency and a few recent scandals have helped drive this perception. The healthcare industry certainly "gets it," but this gap provides a big opportunity to communicate strategically that there healthcare truly can have a purpose much higher than profit. Implication: Healthcare companies that authentically invest in sustainability -- walk the talk and communicate it effectively -- will have an edge by being able to show their purpose before an increasingly informed and skeptical audience.

As an industry which in and of itself is inextricably tied to purpose -- and positioned better than any other to positively impact people's lives -- healthcare is at the precipice of a huge opportunity. To take advantage of it, build trust, and create an ecosystem that lessens burdens on individuals, systems and the planet, it must make a commitment to integrating long-term sustainability into the way business is done.

Can the industry do it? Will a bold leader take an unprecedented, risky... and perhaps unpopular step? Or, will the industry continue to make incremental improvements until regulation, stakeholder expectations or even catastrophe force a shift in rooted business models?

What do I believe? The leaders will be winners.

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